Edgars outlines migration roadmap to VFEX
EDGARS Stores Limited has outlined a migration roadmap to the Victoria Falls Stock Exchange (VFEX), as it seeks to unlock several advantages, including access to US dollar capital for expansion initiatives, driving business performance, and ultimately enhancing company and shareholder value.
The firm expects to make its debut on April 8 and become the first clothing entity to list on the bourse.
Edgars Stores Limited engages in the retail of clothing, footwear, textiles, and accessories in Zimbabwe and the company operates through six segments: Edgars Stores Retail, Jet Stores Retail, Manufacturing Carousel, Micro Finance Club Plus, Corporate Head Office and Financial Services.
In addition, it provides microfinance loans to the lower – to middle-income customer group.
Last month, the group notified its shareholders that it is joining the great trek to the fast-moving VFEX, which has shown great potential to benefit the company.
Investors who participate in the VFEX benefit from the ability to move their capital and dividends in and out freely, low transaction costs, tax incentives that include a five percent dividend withholding tax for foreign investors and exemption from capital gains withholding tax for all investors and minimal currency risks.
In its abridged circular to stakeholders Edgar’s Stores said on, the board of directors on February 22 a resolution in support of the termination of Edgars’ Zimbabwe Stock Exchange (ZSE) listing.
According to the circular, the last day of trading of Edgars shares on ZSE is planned for 27 March ahead of the transferring of the share register from ZSE to VFEX on March 4.
The group anticipates to complete the VFEX listing on April 5 and the first day of trading is planned for April 8.
The rationale for Edgars Stores Ltd migration from the ZSE to the VFEX is to enhance accessibility to US dollars capital and expansion of investor base.
The group said Edgars will gain an enhanced capacity to raise capital in foreign currency, supporting the company’s foreign currency needs.
In a note to shareholders, the chairman of the board of directors, Mr Thembinkosi Sibanda said historically, the Edgars business has heavily relied on local currency transactions.
However, he said recent times have witnessed a notable surge in foreign currency transactions, a trend mirrored across the broader economy.
“Moreover, the Government’s extension of the multi-currency regime until 2030 underscores the growing necessity for USD capital within our company. The performance of Edgars in the past year has been subject to exchange rate volatility and market liquidity fluctuations in both ZWL and foreign currency.
“However, management remains optimistic, steering the business towards expanding its physical and online presence, coupled with strategic merchandise procurement initiatives reliant on USD access.”
He added that the firm’s commitment to this pursuit continues as they explore options to fortify the business’s access to US dollar capital and consider migrating to US dollar reporting, ultimately enhancing sustainability and shareholder value.
He said the strategic migration move is anticipated to unlock several advantages, including access to US dolar capital for expansion initiatives, driving business performance, and ultimately enhancing Company and Shareholder value.
“The enabling of free dividend and share disposal proceeds repatriation to foreign shareholders.
“Favourable tax incentives, including zero capital gains tax and a five percent withholding tax for foreign investors, thereby boosting shareholder returns.”
He added that lower trading costs of 2,31 percent compared to 4,63 percent on the ZSE, which enable the shareholders to retain more of their value when they exit or enter their trading positions, was another motivating factor.
“This move aligns with our commitment to fostering sustained growth, maximising shareholder value, and positioning the company for success in an evolving economic landscape,” he said.
VFEX has become a critical component of Zimbabwe’s ongoing efforts to revitalise its capital markets and attract global investment, by providing a platform that caters to foreign investors and offers stability in a hard currency ecosystem, the exchange is stimulating economic growth and fostering a supportive investment environment.
The Government has committed that the VFEX will remain a foreign exchange market in line with Vision 2030,which requires a lot of foreign investment as the country needs a vehicle that will make it attractive to foreign investors hence the VFEX, which has tax benefits.
VFEX offers a number of incentives and trading advantages compared to the ZSE, which has been the pulling factor for listings.
The USD-denominated exchange provides extended options for capital raising, including debt listing in foreign currency. —chroicle
